Introduction to

Freight Brokering

By John D. Thomas
Atex Freight Broker Training, Inc.
www.atexfreightbrokertraining.com
 2

Preface

Foreword

Section 1 - Industry Overview

Section 2 - Before You Begin

Section 3 - Getting Your Broker Authority, Other

Registrations and Insurance

Section 4 - Finding Shippers

Section 5 - Loading Boards

Section 6 - Calculating Rates

Section 7 - Getting Set up with the Shipper

Section 8 - Taking the Order

Section 9 - Negotiating Strategies

Section 10 - Booking a Load with the

Motor Carrier

Section 11 – Freight Broker Software Resources

Section 12 - Accts Receivables, Accts Payables and the

Filing System

Section 13 - Developing a Written Business Plan

Section 14 - Using Factors and Obtaining Financing

Section 15 - Filing Claims and Other Legal Matters

Section 16 - Establishing Good Creditworthiness

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 3

Section 17 - Telephone, Communications and Start up

Necessities

Section 18 – Resources

Section 19 - How Much Money Can You Realistically Make?

About the Author

Click here to return to – www.AtexFreightBrokerTraining.com

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 4

Preface
Here is how to read this eBook.

Read through each chapter including the author’s information at the

end. Then, come back to this page and click on the link below to learn
more about what John does and what John offers.

Go ahead, click on this link when you return: In A Nut Shell Here you
will find a complete list of services and products including costs.

Then go to John’s blog at: http://www.freightbrokeringblog.com

The title of this blog is “John Thomas on Freight Brokering”. It is
packed with a ton of practical and useful and insight.

Then, feel free to pass this eBook on to a friend or family member

who might benefit from this.

But WAIT ! – Order John’s other eBook now and save $20 off the
regular price. This is a one-time offer for readers of this eBook. Just
click on the link below.

http://www.atexfreightbrokertraining.com/JohnThomasBlog07_2.html

The Best of "John Thomas on Freight Brokering" - The Best Blog

Posts of the Year - Vol.1

Grab this eBook now! It is jam-packed with nearly 100 insightful,

practical and useful blog posts covering topics such as starting a
freight broker business, freight broker training, freight broker
marketing strategies, freight broker tools of the trade, getting your
freight broker authority, freight broker financing, plus more.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 5

Foreword
The purpose of this introductory manual is to provide general industry
information about freight brokers. This manual does not include all
the detailed steps and procedures necessary to actually get set up
and operate as a freight broker. Other comprehensive training is
required for this.

This manual, however, will familiarize you with the industry and its
components.

In this introductory material, you will learn what is required, what to

expect as you get set up and what you need in order to be properly
organized. You will also learn some essential requirements that you
will need in order to maintain and grow your business.

The four areas of concern for new freight brokers include:

1) Application requirements for the broker

authority,

2) Using essential tools such as the loading

boards, load manager software, and resources
used in calculating rates,

3) Searching for customers, and

4) Applying various procedures such as getting

set up with customers, pre qualifying motor
carriers, taking the order from customers,
booking loads, looking at financing options and
so forth.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 6

After reading this valuable resource, you’ll come away with a good
understanding of what is required and what really goes on working as
a freight broker.

However, you may read all the educational materials you desire on
the subject of freight brokering – but the final questions remain:
Exactly how do I get started? What applications need to be
completed - where and how do I file them? What steps do I need to
take for other related matters? When do certain things need to get
done? Where do I find customers? How do I talk to shippers? How do
I get good drivers? How can I pre qualify them?

Consequently, additional step-by-step instruction is needed if a

person is serious about freight brokering. The industry is too
competitive and risky to learn it on your own.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 7

Section 1 - Industry Overview

The industry:

Freight brokers arrange for the transportation of cargo between

shippers and motor carriers. Nearly everything you touch throughout
a given day has been transported by a motor carrier. The industry is
enormous. Most cargo is shipped with either a dry van, a refrigerated
unit (reefer) or a flat bed. Cargo is shipped both within local markets
as well as long distance and coast to coast.

Freight brokers, then, seek, identify and get set-up with shippers,
manufacturers, growers and distributors who have cargo to transport
and who rely upon freight brokers to find motor carriers.

Motor carriers may be either large trucking companies who hire their
own employee drivers; or carriers may be independent drivers
(Owner Operators).

A freight broker derives a commission for their matchmaking skills.

Freight brokers are also known as “truck” brokers, “transportation”
brokers and “property” brokers. And the brokerage industry can span
not only trucks but air, rail and ocean liners. This information manual,
however, will deal only with the trucking industry in the 48 contiguous
states.

Freight brokers are governed by the Federal Motor Carrier Safety

Administration (FMCSA) of the Department of Transportation (DOT).
There is no governing body other than these. There are no tests
given to pre-qualify freight brokers. We’ll look at the requirements in
Section 3.

What shippers are looking for:

Shippers are working within cost constraints. They often set the rate
as to how much they will pay. Supply and demand sometimes dictate
how much particular loads are paying. Shippers are looking for
carriers who will move their cargo safely, efficiently and cost-

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 8

effectively. And they are looking for brokers who conduct business
honestly, reliably and with an excellent service-oriented mentality.

What carriers are looking for:

Carriers are looking for good rates. They also work within cost
constraints. If motor carriers are knowledgeable about what their
operating costs are it helps them remain competitive. Knowing what
is needed to maintain equipment, pay personnel and make a profit
can make the difference of making it or breaking it.

Consequently, a freight broker is required to use good negotiating

skills to complete a “competitive” transaction whereby everyone is
satisfied – shipper, carrier and broker.

What brokers are looking for:

Brokers may first locate shippers who have cargo to ship and then
look to motor carriers to “cover” the load. Or brokers may have motor
carriers on hand who are seeking cargo to haul. In either case, the
broker wants to make a match or cover the load.

Initially, a broker will spend many hours on the

phone searching for both shippers and carriers.
With experience, however, a broker learns to work
pro actively where both shippers and motor carriers
initiate much of the business.

This of course all depends on how well the broker performs. Getting
both shippers and carriers to rely upon them is one of the primary
objectives of the broker. This is when business starts to mushroom.

When brokers get set up with shippers the broker may need to do a
credit check to avoid getting stuck with a poor paying shipper.

And before brokers work with carriers, the broker needs to pre qualify
carriers. A carrier may be ready, willing and able to complete a haul;
but the broker needs to document the carrier’s status – legal,
insurance and operational.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 9

Section 2 - Before You Begin

Before a broker completes the various applications for his broker
authority he will need to come up with a form of doing business and a
business name. It’s not necessary to incorporate but this is the most
desired form of doing business. Other alternatives are to form a
Limited Liability Company LLC, a Sub-Chapter S Corporation, a
regular Partnership or as a Sole Proprietorship.

It’s relatively easy to get incorporated without using

an attorney. Sometimes the Articles of Incorporation
are available on the Internet and are only one or two
pages in length.

If you incorporate or set up a partnership you will need to apply for a

federal identification number (FEIN). Sole proprietors will use their
social security number when filing various documents and forms.

If a business name other than the applicant’s personal name is

desired, the broker needs to check to make sure that the name is
available and is not otherwise taken by someone else.

It’s called a fictitious or dba (doing-business-as) name and the name

search can be done at the state or county level.

If partners are involved it’s a good idea to have a partnership

agreement drawn up in order to have a clear understanding of how
each partner will operate and what are the expectations.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 10

Section 3 - Getting Your Broker Authority,

Other Registrations and Insurance
Each applicant for the freight broker authority will need to:

 obtain a motor carrier number

(MC#),
 to show evidence of a $10,000
surety bond or trust fund, and
 obtain a BOC-3
 obtain the UCR

The application for the MC# is made through the Federal Motor
Carrier Safety Administration (FMCSA). The surety bond is obtained
through various financial institutions; and the BOC-3 is easily
obtained by various vendors.

The surety bond or trust fund ensures shippers and motor carriers
that the broker has at least $10,000 set aside to pay claims related to
non-payment to motor carriers.

The broker has the option of putting his own money up to secure the
trust fund; or he may use an institution that specializes in putting up
the funds which are collateralized with accounts receivable. In this
case, the broker does not have to put up the entire $10,000 out of his
own pocket. The cost for this may run less than $1,000 to get the
bond set up.

It’s best to go with a company that specializes in freight broker surety

bonds and that know how to deal with unsubstantiated claims against
the broker. Otherwise, the broker could have his surety bond invaded
if the company does not fully understand transportation operations
and law.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 11

The BOC-3, which is the Legal Process Agent permit, gives the
broker legal representation in all 48 states where papers may be
served in the event a claim is filed against the broker.

The UCR stands for Unified Carrier Registration and is a relatively

new requirement that is relatively inexpensive.

While the broker is not required to obtain personal or cargo

insurance, it is recommended he purchase “contingent” cargo
insurance. This is not cargo insurance; rather, it is insurance that will
pay for a motor carrier’s damaged cargo in the event the carrier’s
insurance company does not pay for whatever reason.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 12

Section 4 - Finding Shippers

Usually the first step in brokering is to contact shippers who use
freight brokers and then get set up with them. While making personal
visits can be effective, they are usually not too practical. They can be
very time consuming.

The most practical marketing approach is using the telephone. There

are numerous websites and shipper directories with phone numbers
and other useful information. To some extent this is a numbers game.

Most successful brokers, however, will develop a

marketing strategy. Instead of making blind,
unplanned searches, the broker may combine
telephone calls, brochures, cover letters andemail
campaigns – all of which may include various
approaches.

However, in the initial stages of searching for customers, it may feel

like you are “all over the place”. This is okay to some extent.

The initial goal is to find shippers who have shipping needs. The
broker finds out what these needs are and then strives to fulfill these
needs with extra ordinary service. When initially talking to shippers,
it’s not always necessary for the broker to sell himself in the
traditional sense.

But the broker does need to come across as a professional who

knows what to do, when to do it and how to do it.

The process of getting set up with a shipper includes gathering

pertinent information, putting this information into a database and
then faxing the set up package. The database becomes a valuable
asset and should grow in value as more names are added.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 13

Section 5 - Loading Boards

Loading boards are websites used to post loads that the broker gets
from shippers and to search for available trucks to cover the loads.
These loading boards are also used by trucking firms that post their
available trucks along with the ability to search for brokers’ loads
once they are posted. At times a broker can expect to receive phone
calls within several minutes after posting his load.

Some loading boards will allow one to both post loads and to search
for trucks as well. Other loading boards will only allow one to post
loads but they may automatically post the broker’s loads to as many
as 30 or 40 other loading boards.

There are various features in each loading board

but the primary activities for the freight broker will
include posting loads and searching for trucks.

Some loading boards have related services such as doing “lane

searches” to locate trucking firms that normally run certain lanes or
they may include information on going rates or they may include
broker dispatch software. Of course, some of these related services
may require additional expense.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 14

Section 6 - Calculating Rates

Calculating rates is pretty much straight forward for many loads. For
example, let’s say the shipper has a load from Denver to Houston. He
may pay $1,800 for the load. This is just a flat rate.

Or if the shipper is paying a certain rate per mile, this again, is very
straight forward. The shipper may want to pay $1.45 per mile, as
an example.

Equally simple, as well, is paying by the piece rate. A shipper may

pay $1.65 per bag of onions or per box of frozen chicken, for
example.

Another method may include paying by the hundred weight (cwt). The
shipper may be paying $5.50 per hundred weight, for example. If the
load weighs out at 45,000 lbs, the rate would be calculated as 450 x
$5.50 = $2,475.

Regardless of which method is used for paying the

broker, many problems can arise if the proper
information is not gathered especially related to
the loading weight and the maximum weight that
can be hauled by the carrier. It’s very important for
the broker to understand all the requirements and
limitations in these cases.

In each example for paying the broker, the broker will deduct what
profit he desires and the remainder will be offered to the truck.

When calculating rates, it is important to know if there are extra

charges involved such as unloading fees or for extra picks or drops.
The broker also wants to ask if the shipper will pay a fuel surcharge
on top of the regular rate.

With escalating fuel prices and no end in sight, more and more motor
carriers are requiring the fuel surcharge.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 15

Section 7 - Getting Set up with the Shipper

Before a broker begins working with any shipper, the broker will need
to get “set-up” by faxing an information package. The package will
include papers such as a copy of the motor carrier number, evidence
of a surety bond or trust fund, the certificate of insurance (if
contingent cargo insurance is purchased), the W-9 form plus
whatever other information the broker would like to include.

After receiving this information, the shipper enters it into his system
and the broker and shipper are ready to do business.

Some freight brokers have broker-shipper agreements but these are

rare for beginning brokers. Normally new brokers do not have a fleet
of trucks at their disposal to guarantee to cover each and every load
a shipper is offering.

Many shippers will want the broker to give quotes or rates for any one
or any number of loads. For a new broker, this can be time
consuming if there are a large number of loads. Plus, many new
brokers may not be real confident when giving quotes.

There are various resources that will provide some information about
going rates. These resources are good tools but when working with
“live” loads the broker depends upon negotiating skills as well as
relying upon other resources.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 16

Section 8 - Taking the Order

Taking the order is super critical. Shippers have specific instructions
and they sometimes relay this information very rapidly. Most
beginning brokers use a checklist to make sure nothing is left out. If
there is any question at all after getting off the phone, the broker
should never hesitate to call back to get something clarified. Why?

Because the broker has to communicate this information to the motor

carrier or his dispatcher. If there is any uncertainty before calling the
motor carrier, problems will surely arise.

Shippers want brokers who will be assertive enough

to get the proper information and who will keep them
fully informed of any potential problems that may arise.

Pick up and delivery instructions are very important as well as any

equipment requirements the shipper needs. Sometimes the shipper
has specific appointments set up for deliveries. Sometimes they want
the driver to call in to make their own appointment. Sometimes the
shipper will have a fairly general time frame for a delivery such as
“Friday morning before noon” or “Wednesday afternoon before 4
p.m.”

And of course, if there are extra pick ups or deliveries, the broker
needs to get a clear understanding of this and then communicate this
to the truck. Generally, the truck driver will require extra fees for each
extra pick up or delivery.

If there are unloading (lumper) fees involved, the broker needs to

know up front how much they are if the shipper does not pay for
them. Otherwise, the broker could see his profit margin slashed if he
ends up paying for an “unexpected” unloading fee.

If shippers are shipping frozen or refrigerated products, they will often

ask for a pallet exchange. In this event, they will want the truck to
deliver some empty pallets on the pick up and then retrieve them
when the delivery is made.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 17

Of course the type of product being offered to be hauled and the

estimated or required weight needs to be gotten from the shipper and
communicated to the driver. It’s illegal for trucks to run overweight
and it’s up to the driver to control this.

Last of all, the broker needs to ask for a fuel surcharge. However, if
the shipper does not allow for a fuel surcharge, it will be difficult to
pay a surcharge to your trucker.

Then again, the key is communication and preparation. Find out the
details, communicate these to the driver. Make it all happen to the
satisfaction of shipper, motor carrier and yourself - a difficult tight
rope to walk at times.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 18

Section 9 - Negotiating Strategies

Freight brokering is the art and science of negotiation – and the
broker is in the middle. Generally, the price (rate) is the item of
primary importance.

Of course, some aspects of freight brokering are usually never

negotiable such as destinations, type of equipment needed, and
temperatures for refrigerated loads – to mention several.

Then there are other items that may be subject to some negotiation –
pallet exchanges, fuel surcharges, pick up and delivery times in some
cases to mention a few.

But rates and fuel surcharges are the big items. Rates are subject to
a number of factors such as shipper and carrier urgency and supply
and demand. There may be other factors as well.

A new freight broker most likely may need to ask the shipper what
they want to pay on a particular load. It’s difficult for a new broker to
dictate to the customer what he wants. But as the broker builds
experience and knowledge, he may more often dictate what is
wanted for particular loads.

Over time, if the broker performs well for the shipper,

the broker may be able to negotiate better rates.
With better rates from shippers a freight broker can
meet his or her profit margin goals and at the same
time offer the truck more money. There is nothing
like having drivers or their dispatchers calling because
they know they can expect a good paying rate.

In regard to negotiating destinations, the shipper will usually not

rearrange shipping destinations just because that’s what a driver
wants. However, at times the driver will make destinations a
“negotiating” point only in an attempt to get a better rate.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 19

One of the keys for freight brokers (and anyone else in negotiations)
is to understand where to “draw the line”. And in order to draw the
line, the person needs to know what profit margins are needed. And
in order to know what profit margins are needed, the person needs to
know what his or her costs are.

There are business owners throughout the entire business

community that are working at a loss because they don’t know what
their costs are, they don’t know what kind of profit margins are
needed and, therefore, they have a very unstable base for any
effective type of negotiation. Needless to say, a business is headed
for self destruction in these cases.

This entire area of financial analysis can get quite complex and yet
it’s very possible to break it down into workable units to enable even
the least educated business owner to be able to perform like a well-
seasoned financial expert.

The better a broker understands what he needs and the better he

hones his negotiating skills, the more likely he will succeed. A good
deal is a win-win-win situation for the shipper, for the motor carrier
and for the broker.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 20

Section 10 - Booking a Load with the

Motor Carrier
Booking a load with a motor carrier is getting a load “covered”. When
the freight broker finds a motor carrier who says they want the load,
the broker begins the process by pre qualifying the motor carrier.

The first item is to make sure the truck is empty and nearby unless
the delivery is for later in the day or for the next day.

Then a freight broker needs to check the motors carrier’s authority,

insurance and driving record. The freight broker should have a written
or mental checklist of important items before signing on a motor
carrier.

If everything checks out and the broker satisfied with the information,
the broker may then fax his set up package which will include
evidence of his authority, surety bond and so forth.

A broker will always want to have a well-prepared

broker-carrier agreement that governs all aspects
of the business relationship. The generic broker-carrier
agreements on the Internet are so generic it’s doubtful
they would stand the test of time.

A broker needs to have a fairly “air-tight” agreement in place. Nothing

is 100% air tight when it comes to legal claims and assertions – but
the agreement needs to be more than just a generic tool.

The last item a freight broker needs before dispatching a motor

carrier for the pick up is a signed confirmation. The broker prepares a
confirmation for each load, faxes it to the driver or the dispatcher and
then waits not much longer than 10 minutes to get it back.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 21

Once the freight broker receives the signed confirmation, he may call
the truck driver directly and go over the details of the load. It’s
important to make sure there is a clear understanding of each load
including the importance of communicating properly until the load is
delivered.

Normally, the freight broker will require the truck driver to call in at
least every morning to provide the driver’s location and estimated
time of arrival (ETA).

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 22

Section 11 - Freight Broker Software

Resources
Regulations by the Federal Motor Carrier Safety
Administration (FMCSA) of the Department of
Transportation require each freight broker to have
accounts so that the revenues and expenses
relating to the brokerage portion of its business are
segregated from other business transactions.

This usually involves using a general ledger software package which

is used to record each financial transaction. Before an accounting
system is set up, a chart of accounts needs to be developed to
include assets, liabilities, capital structure, cost of sales, income and
revenues, and operating expenses.

QuickBooksPro software is very popular and has immense power;

yet, with that power comes a greater degree of complexity.

It might be best to have a sharp professional set up an accounting

system if the broker is not highly experienced with accounting or
general ledger software.

Broker (dispatch) software packages are available by various

vendors. Beginning brokers, however, are not encouraged to invest a
large sum of money immediately in broker software.

First, the broker will want to understand the details peculiar to the
freight broker business to know what features are needed; and
second, it’s best to wait until the business justifies spending a large
sum of money. Lower-priced dispatch software will usually run around
$2,000 at a minimum.

Nevertheless, a number of these software packages are good. They

will allow the broker to build shipper and carrier databases; they will
allow the broker to manage loads from the beginning point of taking
the order to the final point of receiving payment from the shipper.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 23

A freight broker can build a history of load activity by saving the

details on each load. And confirmations can be generated with
greater efficiency and accuracy than by doing it manually.

In regard to building shipper and carrier databases, as mentioned

above, dedicated freight broker software will provide an integrated
system of information and serve as a database for both shippers and
carriers.

Otherwise, there are a number of off-the-shelf databases that can be

purchased. It’s essential to build a database of shippers and carriers
regardless of which software method is chosen.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 24

Section 12 - Accts Receivables, Accts Payables

and the Filing System
Regulations by the Federal Motor Carrier Safety Administration
(FMCSA) of the Department of Transportation (DOT) require each
broker to have a record of each transaction (load) and these records
shall be kept for a period of three years. Also, the broker’s tax
accountant will most likely encourage brokers to get their paper work
organized, not only for the accountant’s sake, but in case of an audit.

Probably the most compelling reason to get organized that will have
the most immediate impact is to be able to respond immediately to
any questions from shippers or carriers that a broker might have on a
daily basis.

The paper flow will most likely go as follows:

 After the carrier makes his delivery, he’ll mail the

invoice to the broker along with the related paper
work such as the bill of lading, the weigh ticket, etc.
 The broker upon receipt of these will enter the
information into the accounting and load manager
systems.
 The broker then invoices the customer including
copies of the bill of lading and so forth.
 The accounts receivable and payable will need to
be monitored just like each particular cargo load.
 Each broker will have a carrier file and a shipper
file. Each file will have a copy of the paperwork
related to each load. The carrier file, however, will
also include the “permanent” papers stapled
together such as the broker-carrier agreement, the
certificate of insurance, their W-9 form, etc.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 25

Section 13 - Developing a Written Business Plan

A business plan is a written description and plan of action. Business
plans exist initially in the minds of the entrepreneur – but eventually
should be expressed in written form.

There are three major elements to a business plan:

 Narrative –
This consists of a descriptive story of what
the business is, how it will be managed
and developed, where it will be located,
who it will serve and so on.

 Cash flow statements –

These consist of anticipated financial
activity and should be both monthly for the
first year or two and at least annually for
the first three to five years.

 Exhibits –
These may consist of any special studies,
research or findings relevant to the
business that support other information in
the business plan.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 26

It is important to consider –

WHY YOU NEED A WRITTEN BUSINESS PLAN

Here are some reasons. A written business plan –

 Will give you focus

 Will show whether the business is financially feasible
 Will show you what you need to continue the business
 Will show you how much it is costing you to run your business
 Will help you get financing for your business
 Will show you who your customers are
 Will show you who your competition is and how their customers
can become your customers
 Will show you the demographics of your business area
 Will show you the best way to get new customers
 Will show you the possible problems you will face
 Will show you what everyone is hired is supposed to do
 Will show your areas of weakness and strength
 Will give inspiration to all who read it

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 27

Section 14 - Using Factors and Obtaining

Financing
As in any business, managing cash flow is very important to say the
least. Many businesses fail simply because of their inability to
manage cash.

In the freight broker industry, it is important to pay

motor carriers usually within 21 days. At the same
time, the broker may need to wait 30 days or more
to receive money from the shipper on any particular
load. Needless to say, the broker needs a cushion of
some sort. If the broker doesn’t have a cushion many
new brokers use factor companies who buy their
accounts receivable for a per cent of the take.

Many factors are reluctant to work with new brokers simply for the
reason that the factor will require a minimum volume each month
which the broker may not be able to attain. Other factors, however,
are happy to work with new brokers and do not impose any minimum
volume. In the latter case here, the broker may expect to pay only 2-
5% for each load – which is a good way to get the broker on his feet.

Other financing options may include regular bank term loans, a line of
credit or even credit cards.

One sure way to fail when seeking bank financing is to be unprepared

and ill-equipped. The business owner in these cases usually relies
upon the banker for information. Not a good idea.

The business owner needs to lead the banker with well-prepared

plans that display confidence and knowledge. Banks will want to see
a written business plan plus the related cash flow projections.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 28

Section 15 - Filing Claims and Other Legal Matters

If and when you should have the misfortune of experiencing damaged
or missing cargo which requires filing a claim against the motor
carrier, it is the shipper’s responsibility to file claims. The broker,
however, should stand ready to assist the shipper. Most shippers
should be knowledgeable about the claim process; however, some
may look to the freight broker for assistance. In this case, the broker
is obligated to at least provide the proper name and address of the
carrier to the shipper.

Normally, a freight broker is not liable for cargo damage

or missing pieces. Unless, of course, the broker is
negligent in following certain practices. At least one
expert in the industry asserts the fact that brokers may
very well be liable for damaged or missing cargo. He
then goes on to state that "Liability is created when
incorrect transportation operations are undertaken in
day to day operations".

This would seem to imply that if "correct" operations are undertaken

there is no liability created or possibly there is less likelyhood for
becoming liable.

If proper care is taken to ensure that motor carriers are pre qualified
and if proper operating procedures are established and followed -
these most likely will go a long way in keeping the freight broker from
incuring a lot of unwanted litigation.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 29

Section 16 - Establishing Good Creditworthiness

Paying truckers on a timely basis is critical – a top priority. This is one
of few businesses where one wants to pay vendors quicker rather
than later. The time line for paying motor carriers is usually within 21
days on average.

A broker’s payment history goes on record. Once a broker

starts getting customers and paying motor carriers, a payment
history begins. This information is public knowledge and motor
carriers will check out the broker’s credit worthiness. If there
is little history available, the carrier may refuse to work with a
particular broker.

Advance payments in the form of “com” checks or C.O.D.s (cash on

delivery) are usually difficult for a new freight broker to use. But as
the broker learns to use good cash flow management, making
advance payments or C.O.D.s will help a broker establish
creditworthiness.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 30

Section 17 - Telephone, Communications and

Start up Necessities
The start up requirements for a freight broker are relatively simple
and inexpensive. The start up needs may include the following:

 A good computer – preferably high-speed

cable or DSL
 Telephone – preferably at least two lines
 A good long distance telephone service
 A good fax machine maybe with a spare for
a backup
 A file cabinet – and you are in business!

It may be helpful to have a toll free number but it’s not entirely
necessary. Toll free services are very affordable as compared to
years ago.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 31

Section 18 - Resources

 Transportation Intermediaries Association

(TIA)

“TIA is a unique network of the leading third

party logistics professionals (freight brokers)
active in the industry today.

 Small Business Development Centers -

SBDCs
Office of Entrepreneurial Development
United States Small Business Administration


SBDCs offer one-stop assistance to individuals and small
businesses from various branch locations. For any topic related to
small business start-up, numerous training and counseling services
are available.

SBDCs are usually connected with community colleges.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 32

Section 19 - How Much Money Can You

Realistically Make?
You can make some very good money as a freight broker – but it
won’t happen overnight. As with any service-oriented business, it will
take time to get established. How much time? It depends.

It depends on a number of variables such as: will you have help, will
you operate out of your home or an office, are you willing to work
weekends, can you be prepared to manage and monitor loads
24/7/365, can you manage cash flow, can you put a deal together,
are you assertive, are you detail oriented, can you work in a fast-
paced environment, can you multi-task, do you have capital to carry
you until you get established, can you work the phones effectively, do
you have goals and specific strategies, are you determined, can you
push frustration aside and keep plugging away - and so on and so
forth – and last but not the least – do you know all the detailed, step-
by-step procedures required to operate successfully over the long
haul.

If you can answer yes to a good number of these variables, you are
on your way to success.

Now, having said that, what about the income potential?

You can realistically expect to get between 10-15% profit
on each load. This is after you pay the truck. Some loads
will yield less than 10% and some more than 15%.

For example, if your shipper is paying you $1,500 for a load, you
might begin by figuring a profit to yourself of between $150 and $225.
(You would then offer the truck between $1,350 and $1,275).

Now if you make an average of $150 per load, the question remains:
how many loads can you do consistently every week? Starting out
you should be conservative depending upon your situation. So you
might think in terms of 1-4 loads per week. This would yield a weekly
income (before operating expenses) of between $150 and $600.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 33

Nothing to set the world on fire – but, hey, it’s a start. Some brokers
will fare better in the first year, some will fare worse.

Now let’s say you are in your second or third year. And your average
profit per load is $175 and you are now moving more loads. Let’s say
you are moving between 7-12 loads per week. This would yield a
weekly income (before operating expenses) of between $1,225 and
$2,100. Or $63,700 to $109,200 for the year.

Remember - these are just examples. The figures are hypothetical

and are of no indication of how you might do yourself.

These scenarios represent your gross profit after paying the truck.
The gross profit then represents what income is available for your
operating expenses such as telephone, insurance, office supplies,
loading boards, salaries, etc. – and YOUR salary will most likely be
the biggest operating expense.

One of the nice things about starting a freight brokering

business is the fact that your overhead expenses are
relatively low. By overhead, I mean those expenses
other than payments to your motor carriers.

So even if you spend time getting established, you are not

overwhelmed with heavy, monthly overhead expenses. And your
fixed expenses are relatively few and low.

Most of your expenses are variable – they vary with your income.
That is, when your income is low such as just starting out, most of
your expenses are low. As you income increases, most of these
variable expenses will increase as well - however, your fixed
expenses remain the same and this is when your profits start to
mushroom.

Now let’s look at your start up expenses. Then again, these are
relatively low.

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 34

Required:
 Motor carrier number - $300
 Surety bond - $550 - 950 (minimum)
 BOC-3 - $35-$40

If you need the following, they will run extra:

 Computer
 Fax machine
 File cabinet
 Misc.

So, there you have it. You have just read an excellent Introduction to
Freight Brokering. Thank you for your interest and if you have a friend
or family member who would benefit from this information, please feel
free to pass this eBook on to them.

And remember …..

The freight broker business is a REAL opportunity and once you

get established, your income is almost unlimited. But first, you
need to get properly trained …

-------------------------------------------------------------------------------------------

WAIT! – Order the following eBook NOW and save $20 off the
regular price. The Best of “John Thomas on Freight Brokering” – The
Best Blog Posts of the Year – Vol. 1

Grab this eBook now! It is jam-packed with nearly 100 insightful,

practical and useful blog posts covering topics such as starting a
freight broker business, freight broker training, freight broker
marketing strategies, freight broker tools of the trade, getting your
freight broker authority, freight broker financing, plus much more.

Click here now for this one-time offer:

http://atexfrei.ipower.com/JohnThomasBlog07_2.html

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com
 35

About the author: "Introduction to Freight Brokering"

John D. Thomas, is President, CPA and sole owner of Atex Freight

Broker Training, Inc. He has over 25 years’ experience working with
small business start ups. Currently he provides comprehensive, one-
on-one, practical step-by-step freight broker training over the
telephone and Internet. This training is based upon his actual,
previous freight broker company. Training begins with applications for
the broker authority and continues with all the nuts and bolts of
brokering.

His website can be viewed at www.atexfreightbrokertraining.com and

he can be reached by email at [email protected] or
you may call us at 1-888-526-ATEX (2839).

To learn more about What John Does and What Does John Offer, go
to: http://atexfrei.ipower.com/inanutshell.shtml

Here you will find a complete list of services including costs.

You may also view John’s blog titled “John Thomas on Freight
Brokering” at: http://www.freightbrokeringblog.com

Copyright 2006-2008 by John D. Thomas, All Rights Reserved

http://www.atexfreightbrokertraining.com